An annual fee is a yearly charge—ranging anywhere from $25 a year to $550 or more—that cardholders have to pay to own a particular credit card. For example, if you’ve never used credit before or have a history of missing payments and are applying for a subprime credit card, you may have to pay an annual fee. All in order to help offset the lender’s risk that they won’t be paid back. Thus, no-annual-fee credit cards are ideal for borrowers who want to benefit from a credit card, but don’t want to commit to an annual charge.
For example, if you plan to carry a balance or are paying down credit card debt, you’ll want to stick with the least expensive card you can find.
You may also prefer a no-annual-fee credit card if you’d like to earn rewards, but don’t want to spend time or energy maximizing rewards or taking advantage of a card’s benefits. No-annual-fee credit cards also make good companion cards. For example, if you’re already paying an annual fee for an airline credit card, you may want to keep a no-annual-fee rewards card on hand for non-travel-related purchases.
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When you’re comparing cards without annual fees, ask yourself what you want from a credit card. Are you looking for an easy way to earn extra cash? A cash-back card is best for you. On the other hand, if you want to finance a big purchase, get a card with a sweet 0% introductory APR deal.
If you plan to regularly carry a balance, skip high-APR rewards cards. Check out cards from your local credit union instead. Smaller banks and credit unions often charge lower ongoing APRs on basic, low-interest credit cards than larger, nationwide banks.
Some no-annual-fee credit cards require more maintenance than others. For example, some cash-back cards with rotating bonus categories. They require you to opt into your bonuses every quarter. Similarly, some rewards cards require you to navigate their multi-step points systems. All in order to redeem a reward. Meanwhile, other no-annual-fee cards offer the same rewards earning rate on every purchase. Thus, you don’t have to worry about anything other than using your credit card.
To get a sense of whether no-annual-fee credit cards are the best choice for you, read through credit card reviews. However, be sure to get information from trusted publications. Meanwhile, the Consumer Financial Protection Bureau keeps a record of complaints consumers have made about different companies.